Biz media buzzing this morn as AB InBev delayed pricing of its Asian IPO in Hong Kong.  Recall, ABI had hoped to raise as much as $9.8 bil on sale of approx 1.6 bil shares expected to sell for between $5.13-$6.02 per, with share price to have been set today.  Now, “the delay comes after the company reportedly guided potential investors toward the bottom of the range,” Reuters reported, noting too that Budweiser APAC “received offers below” that range “from some large US investors.”  ABI execs and its advisors will meet in New York this weekend to decide next steps.  If price not set by midnight Monday in Hong Kong, IPO will “lapse,” tho ABI can re-launch at later date. 

ABI not commenting, but others are.  “Demand in Hong Kong for the biggest initial public offering of the year so far was anything but frothy,” South China Morning Post led its story, headlined “Budweiser float falls flat.”    While such offerings generally oversubscribed so investors get “a good allocation,” Bud APAC less oversubscribed than typical deals and lower than forecast, SCM Post notes.  Why?  High borrowing costs, one analyst suggested. “The Budweiser offering came at a time when the interbank interest rate had risen to the highest in a decade.  This has made many investors reluctant to borrow money from stockbrokers to subscribe to the stock.  Many investors are only using cash to subscribe to the Budweiser IPO, which has cut down the leverage,” he said.  While the IPO “expected to be a good long-term investment,” he added, “for retail investors wanting a short-term gain it is not that attractive.”  As Bloomberg put it: “There’s a staring contest going on between AB InBev and investors” and right now, “investors have the hardest gaze” as “their need to buy is less than AB InBev’s necessity to sell.”  And so, “this is going to be a tense weekend,” Bloomberg sez.  At presstime, BUD shares down about 2%. 

AB Keeps Innos Comin’ in US; 2 New Releases  Meanwhile, on this side of the world, AB keeps runnin’ its innovation machine.  Just announced limited-edition Budweiser Harvest Reserve Deep Golden Lager to be sold beginning this mo in Des Moines, IA and Omaha, NE and then thru harvest season.  Beer is collab with farmers who have grown barley for Bud for generations.  Then too, AB will pilot Michelob Ultra Amber Max in Nashville, TN, Fort Collins, CO and parts of Fla in Sep.  Beer’s brewed with rye, oats, barley and agave and “crafted to remove gluten,” AB sez.  Amber Max aimed at “consumers who want a light lager with a fuller flavor that still fits their active lifestyle.” 

Apologies! Last issue, we mistakenly wrote “UK” soccer team, when there of course is no such thing, a close reader pointed out. US women’s team defeated England in semi-finals.

MillerCoors took corn syrup fight vs AB to next level.  Filed appeal with US Court of Appeals for 7th Circuit to challenge portions of US Dist Ct opinion back in May that continued to allow AB’s original Super Bowl ads, even while it granted MC request to bar AB from suggesting corn syrup is in final MC products. MC sez that AB intended to “exploit consumer concerns about corn syrup.”  Five other US Appeals courts “have held that evidence of intent to deceive consumers can give rise to a presumption of harm” in false advertising cases; 7^th Circuit hasn’t resolved issue.  So, 7^th Circuit’s “guidance, on this and other issues, will be of most value at this stage of the case.”  Back at US Dist Ct level, MC and AB continue to battle over whether Bud Light packaging is misleading and needs to be pulled/altered in light of original order.  That includes dozens of new pages of argument, multiple filings and more “expert” testimony. 

Meanwhile, we can’t help but note (again) that premium light category (Bud Light, Coors Light and Miller Lite combine for 98 share) -5.8% yr-to-date in Nielsen all outlet scans, -7.5% in Jun.  That’s 13.1 mil cases shed yr-to-date.  Then too, lengthy Chi Trib article on seltzer today includes familiar speculation by Mike’s sr veep Sanjiv Gajiwala that seltzer “might be the light beer for the next generation.”  Also includes quote from Jewel-Osco’s asst sales mgr for beer category noting light beer “has been on the decline and it’s getting even tougher.  Bud and Miller didn’t help each other with that corn syrup nonsense.”

Stella Artois is launching next phase of broader, “more relevant and relatable” brand messaging “while tapping into culture” with summer 360 campaign dubbed “Summer Like You’re On Vacation,” featuring actor Idris Elba. Recall, Stella began to seek this broader brand image “evolution” via Super Bowl campaign earlier this yr, starring Sarah Jessica Parker and Jeff Bridges playing their iconic characters known for liquor consumption, (and of course, cameo from Dos Equis’ Most Interesting Man – see Jan 28 Express). Then, co shared aspiration for Stella to become “leading brand in pop culture” and “not being shy to be a brand with character.”

New ad, co-directed by Idris and ad agency, looks to tap into summer occasions where Stella “traditionally” hasn’t had “much activation” in past, brand veep Peter Van Overstraeten explained to INSIGHTS. In fact, this is Stella’s first “full” summer program. Campaign is about “frequency and relatability,” he added. Ads convey that “vacation isn’t about where you are, it’s about how you see things,” further associating Stella with “affordable luxury” beyond solely special occasions. Thruout summer 2019, ads will air on TV nationally (:30 and :15 second spots), as well as digital and social platforms related to food, entertainment and lifestyle, and tailor-made billboards at local level for various major cities across the country.

Stella Up 2% YTD; Stella Spritzer Testing Well Tho Stella Cidre Down Steep Double-Digits Since launching Super Bowl campaign, Stella notably improved across several KPI metrics, most importantly including return to sales growth. Stella is up 2% YTD thru Jun 16 in IRI multi-outlet + convenience data, with sales up 4% for latest 12 wks. And pricing remains solid, at avg of $35.94 per case in scans YTD, +$0.08 per case. Meanwhile, Stella Cidre continues to decline at double-digit rate in 2019, down 17% YTD thru Jun 16 following -15% in 2018. But new low-ABV Stella Spritzer sparkling dry cider is testing well in early innings, Peter said.  In scans, Stella Spritzer’s incremental sales make up for 2/3 of Stella Cidre’s decline YTD, and more than make up for Cidre decline in latest 4 wks. It’s a “regional play for now,” said Peter. But it fits as part of “initiative to trade up” during summer mos while reaching broader consumer base.

Just as Beer Inst, public health groups and others weighed in on TTB’s proposed modernization of fed alc bev label and ad regs, Natl Assn of Bev Importers (NABI) filed extensive comments too.  In addition to many pages of very specific issues, from package size to “mingling” spirits, NABI highlights “key principles” behind its comments.  Unlike many in media or those with biz practices that current regs don’t accommodate, NABI doesn’t use word “archaic.”  But it does, off the bat, remind that “core” of current labeling regs “date from the mid- to late-1930s” and given tech advances and more, “today’s world is clearly different than 1935.”  So, echoing appeal of many new (and established) bizzes, NABI wants TTB to move “from 1935 to the 21^st Century.”

Specifically, US consumers are “intelligent and global,” NABI notes, have access to all kinds of info and can “immediately resolve” any potential confusion on labels with quick internet search.  Back in 1935, consumers “needed more protections” as they encountered newly legal bevs.  But, “parental role” of TTB regs no longer necessary.  Internet creates a “self-policing tool that far surpasses what TTB can do as a regulator” in “second guessing” what may be deceptive.  “Inaccurate, false and unauthentic claims about a product can result in ‘brand death’ in the marketplace” via consumer actions online.  Also: Sup Ct developed 1st Amendment “commercial speech” doctrine that “unequivocally” rejects paternalism by fed govt.  Misleading speech still barred, NABI acknowledges, but fed govt has “high bar” in showing any label or ad misleads.  “Waiting for consumer complaints about specific labels or advertisements may be a better approach than purely speculating in advance of approving a certificate of label approval (COLA) or pre-clearing a proposed advertisement.” 

Then too, Sup Ct expanded “due process” rights since 1935.  Since regulatory actions can have “serious consequences” for bizzes, NABI advises, “simply saying ‘it’s our policy’ as the regulator when the regulation does not mandate or require that result is not sufficient” in today’s world.  One specific place where this issue arises: TTB’s new requirement that all producers “provide upon demand from TTB ‘evidence’ sufficient to substantiate ‘any claim made on any label,’” whether claim explicit or implicit.  That’s “too vague” for importers to know what “evidence” they gotta have on hand (for 5 yrs), given huge number of brands entering biz every yr.  “This regulatory burden is enormous and unmanageable,” NABI believes, and due process “requires far more clarity than what is in these proposed sections.”  NABI also seeks more “clarity and certainty” about regs regarding private labels (far bigger issue in wine/sprits than beer).  Given potential trade practice violations around private label, (i.e. when retailer promotes its own label over competitors’), biz needs more guidance about whether labels should disclose “true owner” of the private label, for example.

Reported price tag of approx. $425 mil for Reyes purchase of DBI in yesterday’s Express was for brand rights only.  Including real estate (DBI has 9 warehouses) total price well north of $500 mil.    

 Media still buzzing about ouster of Constellation cannabis partner Canopy’s co-ceo Bruce Linton last week (see Jul 3 Express).  In follow-up discussion with CNBC’s Jim Cramer, Constellation ceo Bill Newlands said: “Our board was uniform.  We were unanimous that we needed a different leader to take us to the next phase of growth.”  Asked whether Canopy spending too much or if there are issues with margins, Bill stressed need to “focus,” win in Canada and win in US.  Canopy’s position in Canada, globally and Acreage deal in US still leaves it well-placed to win, Bill believes.  Then too, “no problems with the financials” or bookkeeping, Bill assured.  While Constellation expressed support for co-founder and now-sole ceo Mark Zekulin, “Canopy Growth confirmed that Zekulin would only serve until a new CEO was found,” MarketWatch reported.  “Won’t be long,” Bill believes, before cannabis legal at federal level in US, given breadth of support.  And until then, plenty of oppy in Canada, Germany, elsewhere. 

Bill talked a bit about beer too.   Reiterated point from recent conference call that while other brewers “stepping back” from investing in brands, Constellation increased “share of voice” behind its beer portfolio.  “We are accelerating our investments,” Bill told Cramer. That’s helping drive stepped-up Modelo Especial growth, he added.  Then too, Bill said again that Constellation’s “entire” FMB focus for this yr on recently rolled Refresca.

ABI drummed up lots of news across the globe in the past week, ranging from women’s soccer to another ZX Ventures investment in e-commerce overseas, Pure Gold initiative to help barley farmers go organic, a Budweiser-themed documentary and more. Here’s the latest.

Budweiser Official Beer Sponsor of Natl Women’s Soccer League; KINGS OF BEER Doc It’s been a strange week for Budweiser and women’s soccer. But it culminated in Budweiser inking “multi-year partnership” to become “the first official beer sponsor” of Natl Women’s Soccer League (NWSL) in US, co announced following US women’s World Cup championship victory this past weekend. Bud has “naming rights” to playoffs, championship, MVP trophy and “newly created ‘Most Valuable Supporter’ award for the league’s biggest fan.” Plus, it’ll support teams and stadiums locally and create “an innovative off-season program” to “give NWSL players immersive training on the business side of sports from Budweiser executives,” per release. Recall, ABI offered 100K free Budweiser bottles to UK consumers if UK natl women’s soccer team defeated US in semifinals last week. MillerCoors quickly jumped on the oppy to offer 100K free Miller Lites if US won (which they did). But US team was noticeably drinking Bud during post-championship celebration in their locker room, and ultimately Bud got the NWSL sponsorship.

Separately, Budweiser is releasing its own documentary called KINGS OF BEER that will be released Aug 2 “in select theaters in the US and Canada and on demand in over 50 territories,” ACE Content announced and MarketingDrive reported. KINGS OF BEER documents in-house competition of 65 ABI brewmasters from 23 countries to “brew the best, most consistent lager” thruout one year. ACE will release the film and it’ll be distributed by Gravitas Ventures. View trailer here.

Mich Pure Gold Launches Initiative to Support Barley Farmers Goin’ Organic; #34 Brand in Scans YTD Mich Ultra Pure Gold launched “Contract for Change” initiative “that supports American barley farmers who want to transition conventional fields to try organic production for the first time,” co announced today. Recall, Mich Ultra Pure Gold is touted as “first national beer brand” that’s USDA-certified organic and continues to perform well in year 2; $$ sales more than tripled (+220%) YTD thru Jun 16 in IRI multi-outlet + convenience data, making it #34 best-selling beer brand in off-prem scans nationally, not too far behind #33, Pacifico (+14%). As part of Contract for Change, Pure Gold “will sign long-term, full-rotation contracts to purchase the barley grown from the beginning of the transition period through the first year of organic production,” and “will purchase transitional barley at a premium price.”

ZX Ventures Acquires UK Beer Subscription Service, BeerBods ABI’s adding to its online direct-to-consumer capabilities in UK with deal to acquire “UK online beer club and subscription service BeerBods,” reported FoodBev Media among others. BeerBods will “join forces” with another UK-based platform, Beer Hawk, which ZX Ventures also invested in back in 2016, noted site. And recall, ZX invested in UK-based distiller/

e-retailer Atom Group in Apr 2018, as well as other online platforms in other parts of the world such as Australia and Brazil.  Indeed, ABI is actively investing in e-commerce technology abroad where it can own e-retail. BeerBods site touts “a new way to buy the best craft beers,” allowing consumers to “build a case” and reserve beers for up to 30 days, according to YouTube video. It has several thousand subscribers that receive 12 beers in the mail every 12 wks for £36 per 12 wks.

All-outlet scans from Nielsen thru Jun 29 show volume dipped 0.5% in these channels in 1^st half; dollar sales +2%.  Over-arching story still trade up.  Despite soft craft/cider numbers, above premium segments picked up 2.7 share of volume, 2.9 share of $$ Jan-Jun. All in, above premium hit 50.5 share of $$ Jan-Jun (53.2 in Jun!).  Gain driven by FMBs/seltzers (+1.6 share of $$), imports (+0.9) and superpremiums (+0.8).  Premium lights gave up almost 2 full share of $$. Bud Light, takin’ full 10% volume hit in Jun, down 7.7% for 6 mos, lost 1.3 share of $$.  Coors Light -5%, (-0.4 share of $$).  Miller Lite lost just 0.1 share of $$ with 0.9% volume dip.  All other top premium-priced brands down too.  Economy segment down 0.6 share of $$; only 1 brand up among top 10: Natty Light.

Just as above premium segment trends uneven, mixed bag for biggest brands too.  Modelo Especial really revved in Jun (+19.2%) and gained almost 17% for the half, +0.7 share of $$.  Michelob Ultra also grabbed another 0.7 share of $$ for 6 mos, with 15.2% volume gain.  White Claw and Truly Assorted packs up 260% and 240% respectively, nabbed #5 and #6 spots among top above premium brands in most recent period; grabbed 1.3 share of total $$ between ’em for 6 mos.  Stella eked out tiny gain Jan-Jun, but other top imports down: Corona Extra -0.5%, Heineken -0.6%, Dos Equis -1.6% and Corona Light -14.8%.  Blue Moon Belgian White down 1%.

In supplier $$ share battle, Constellation and Mike’s each gained full share Jan-Jun, Constellation at 13.5 share of total $$, Mike’s at 3 share. That was just above Boston’s 2.9 share, up 0.3.   Diageo Beer Co up 0.1 share of $$ at 1.5.  Share shedders for the half: AB (-1.2), MC (-1.0), Heineken USA (-0.2), Pabst (-0.1).

Next big landscape-shifting distribution deal announced to employees this morn.  Largest distrib Reyes Holdings will make one of its biggest beer acquisitions ever, DBI in northern Calif.  DBI sells about 28 million cases, including near 1.5 mil cases of NAs. This deal will push Reyes to 200 mil cases of beer on annual basis.  Deal expected to close in Sep.  Reyes will reportedly pay somewhere around $425 mil.  

Key takeaway: Reyes is heading north.  Importantly, Reyes will acquire 6.5 mil cases of Constellation Brands volume in DBI deal.  And it will very likely make several more acquisitions in northern Calif, especially of Constellation volume over next 1-2 yrs.  Recall last yr, Reyes Holdings acquired Constellation volume from 3 AB distribs in southern Calif that were threatened with termination.  In contrast, tho, DBI is a willing seller.  In SoCal, Reyes paid 7x GP for about 13 mil cases, spending almost a half bil there. Interestingly it paid more for those 3 distribs’ Constellation volume than it will for all of DBI. 

DBI is a sprawling distrib built in a little more than a decade thru multiple acquisitions by David Ingram (of Tennessee’s Ingram family) across much of northern California.  It has locations in San Francisco, San Jose, Sacramento, Stockton and more, nine warehouses in all, which presumably Reyes will consolidate over time.  Reyes already has 27 beer distribution facilities nationwide.  It also has big Coke and McDonald’s distribution bizzes in CA.  This deal will further cement its leading position in state.  DBI will now exit beer biz entirely.

Over the course of its many Southern Calif acquisitions, Reyes became dominant distrib there, working in close partnership with Constellation, which has surged to become #1 supplier in that mkt.  Reyes sells about 88 mil cases annualized in SoCal, with over 60 share of mkt in many locations.  Almost half of its CA volume Constellation Brands, prior to DBI acquisition.  In SoCal, Reyes mainly competes against AB branches that don’t sell other suppliers’ brands and are declining. With DBI acquisition, Reyes will sell around 115 mil cases in CA alone.  Reyes will be over 1/3 of all volume in largest state in country. 

This deal already went thru many twists and turns. When rumblings of this deal first surfaced in late 2018, Reyes not interested in Northern CA.  After the Anderson family sold its Constellation biz to Reyes in LA (Ace, also an AB distrib), they pursued a deal with DBI for months.  But Constellation never gave Topa Equities (Anderson holding co) guarantees and apparently preferred Reyes.  Reyes had its attention turned elsewhere, but then reconsidered its Northern CA oppys.  And now it’s headed North.  Reyes also recently made deal to sell its food service co Reinhart for $2 bil. So it will have even more capital to do more beer deals in CA and elsewhere.